UK economy grows but spending concerns remain

The UK must become less reliant on consumer spending, says the British Chambers of Commerce, despite the economy continuing to grow

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The UK's economy is continuing to grow, but the recovery must become less reliant on consumer spending, a key business survey has suggested.

The quarterly poll of 8,000 firms by the British Chambers of Commerce (BCC) reports that service exports are at an all-time high and many key manufacturing balances are also at record levels, showing that growth is strengthening in the short-term.

However, the survey also warned the recovery must become more balanced in the months ahead as it is still too reliant on consumer spending.

Access to finance remains a critical issue for businesses as they look to expand, the report added.

The Quarterly Economic Survey also noted concern at the “significant” drop in the employment balance in the services sector .

Commenting on the results, BCC director-general John Longworth said: “It is great to see another positive story as we enter the 25th year of our survey.

“Confidence is high and our members are determined to continue driving the recovery. We are brilliant at services and very successful at exporting our knowledge-based industries all over the world.

“This includes everything from accountancy and marketing through to literature and the IT sector.

“In addition, our dynamic, high-value manufacturing sector is once again confounding expectations, and going from strength to strength.

“But UK firms are ambitious, and more support is needed if we are to place the recovery on a sustainable, broader footing in the medium-term.

“We have witnessed many false dawns during the recovery, and external shocks still loom on the horizon. Given that over the next year or so we face political change at home and abroad, long-term policies that support our businesses as they look to grow and invest are crucial.”

David Kern, chief economist at the BCC, said: “The results of our survey suggest that growth is strengthening in the short-term, and support our recent forecasts that the economic recovery is moving at a solid pace.

“But challenges persist and despite this progress, the recovery is not yet secure.

“UK growth is still reliant on consumer spending, driven by a resurgent housing market and a declining savings ratio.

“Given that UK personal debt levels are too high and need to fall, it will be hard to maintain growth levels in the medium-term without significant structural changes to our economy.

“Our current account deficit is the largest in the G7 and will pose long-term risks unless it is tackled. Investment and exports must play a larger contribution to our economic future, or else there is a risk that our recovery could stall.”

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